Applied Rationality focuses on public policy issues and tries to take a liberal perspective that is consistent (comments to the posts will often show otherwise) with neoclassical, rational-choice economics.

Thursday, June 4, 2009

Protecting tax payers

IRS Commissioner Doug Shulman announced today that by the end of 2009, he will propose a comprehensive set of recommendations to help the Internal Revenue Service better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.

Some of the potential recommendations could focus on a new model for the regulation of tax return preparers; service and outreach for return preparers; education and training of return preparers; and enforcement related to return preparer misconduct. The Commissioner will submit recommendations to the Treasury Secretary and the President by the end of the year.

The IRS and the government more generally are right to be concerned about tax payers. However, this is a classic example of one problem begetting further problems.

Tax preparers owe their existance to the complexity of the tax code. The size of this industry (in January 2009 the National Association of Tax Professionals claimed more than 19,000 members) is an immediate indicator of the burdens that tax payers face.

Tax simplification, which hasn't occurred in a meaningful way since 1986, would reduce abuses by reducing the need for preparers.

Sadly, simplification doesn't seem to be in the set of recommendations being considered, but it should be.